Wired Money 2015 – disruption, Bitcoin and the problem with start-ups

Wired Money 2015 brought thought leaders and investors to London’s British Museum this week, with a day of talks that covered Bitcoin and how Generation Z will want to bank, as well as wider ideas about how start-ups can work with, rather than against, market leaders.

Easy money

Fintech companies want to disrupt money by the same means that start-ups have disrupted other industries such as music, retail and transport – by focusing on user experience, and making it simpler for people to get what they want. Just as Uber made ordering and paying for a taxi a smooth, safe, one-click process, digital banking apps are streamlining how easy it is to make payments, transfer money and manage your accounts.

Berlin-based start-up Number 26 enables its customers to bank entirely digitally, from a smartphone app. Sign up takes “around four minutes”, says co-founder Valentin Stalf, and the information is edited on each account so that it’s easier to absorb. Bank statements, for instance, feature irregular payments more prominently, on the basis that regular payments are already known and accepted by the user.

Digital transfer service GoCardless is also banking on user experience design. “In our world it’s being ten times easier that helps,” said CEO Hiroki Takeuchi. Now the UK’s leading provider of Direct Debit, GoCardless is built on good design and agile updates; its coding team can deploy useful upgrades on “a daily if not hourly basis”.

Making banking more like Facebook

One of the problems with banking and financial management is that, simply put, many of us think of it as boring, not to mention complicated. Today’s consumers are just not as interested in checking their spending as they are in scrolling through Facebook, speakers said. But this could change: Raphael Ouzan, CTO at digital financial security company BillGuard, aims to embed the rituals of personal banking into our routines, just like taking a shower or checking your social media. “If it doesn’t become a part of your daily life it doesn’t matter,” he said. “A habit makes a service relevant.”

This line of thinking can be extended to what Generation Z will want from their banking. “Will the bank remain the primary interface? It’s not quite clear,” said Ouzan. “What we do know is financial services will change, because they have to.”

Teenagers in the future, added entrepreneur Andreas Antonoulous, will be as likely to open a bank account as they are to own a fax machine.

Believing in Bitcoin

Bitcoin has been in the headlines continuously over the past few years, but there is still a lack of understanding of what it is – WGSN subscribers can read our primer here – let alone what it could be, said speakers. It is not currency, but money – “the internet of money” said Antonoulous, the author of Mastering Bitcoin. He also warned that corporations who are trying to control Bitcoin and move it quickly into the mainstream are misunderstanding both its power and its potential. “Bitcoin is not smooth jazz,” he said. “Bitcoin is punk rock. You can’t control it.”

Brian Forde, director of digital currency at MIT Media Lab, went on to outline some of the benefits offered by the new money, explaining that it “eliminates the double spend” – with Bitcoin, digital assets have ownership, and that ownership can be transferred. This applies to cash, but also to sports tickets and much larger, more tangible items. “The scale can go from a penny to your house,” he said. Bitcoin’s decentralised system also creates decentralised trust – “we’ve never had that before” – and eliminates intermediaries.

Bitcoin also has the power to change how we ‘prove’ who we are online, too, pointed out Peter Smith, CEO of digital wallet Blockchain. In a world where identity theft currently accounts for 24 billion dollars’ annual loss in the US, compared to 14 billion dollars’ loss from physical theft, this could be crucial to the future of finance. “What about crowdsourcing identity?” Smith suggested. “Other verified people verify me… at some point it gets up to this threshold. Eventually you can build verifiable online identities for people who have never had one.”

Customising credit

Shivani Siroya, CEO at InVenture, is on a mission to empower people who would not otherwise have access to credit. “2.5 billion individuals currently lack a financial identity,” she said, which makes it impossible to go through conventional channels to procure loans. Asking the question, “What if we could build something starting with the individual rather than the system?” led her to develop Mkopo Rahisi, an Android app that provides loans to small business owners in Kenya.

“It creates a credit score for customers by accessing (with their permission) the vast amount of information sitting in their mobile phones. Information like their bank account history, their payments, their browsing location, social networks and demographic information,” Siroya explained. “We take these tens of thousands of scattered data points and create structure, to build a new version of a credit score. And we do this in under one minute.”

The app can customise the kind of credit provided to each customer, and services all of its loans digitally, through channels including Facebook, WhatsApp and SMS. This process “works for people on their terms, where they already are,” says Siroya. Having just launched in Tanzania, the company plans to launch in two more countries by 2016, and is looking to expand its services to include financial advice as well as other verticals.

At the heart of the company, Siroya emphasised, was her belief that people are more dynamic than just “a single number.”

Working with start-ups

Big banks are understandably wary of fintech companies, which could ultimately supplant them. The way that Spanish financial services group BBVA works with digital technology, though, holds lessons for any major company looking to embed innovation into its culture – and keep up with start-ups.

Francisco González, chairman of BBVA, outlined the company’s plans to dedicate 100,000 employees to digital services by 2016, while digitising all of its products. He anticipates that by 2020, they will be handling 1.4 billion digital transactions a day – it’s currently 400 million. BBVA has also been proactive in establishing relationships with innovative companies such as Bitcoin wallet CoinBase, which it has invested in. “Change is a matter of survival,” González summarised.

Jonathan Vaux, Innovation Partner at Visa Europe, spoke straight-forwardly about the friction that can exist between start-ups and incumbents in such a changing industry. “I genuinely believe that by working together, we will succeed together,” he said. “The innovation start-ups bring is fantastic; the scale of the incumbents is invaluable.”

Vaux went on to give start-ups advice on how to approach big, established businesses when looking for partnerships, which included: be clear on your business model; recognise where you bring value; and perhaps most significantly, think wider than Millennials and the priorities they have right now.